Suncor Energy Inc. · TSX:SU
Suncor Energy — Q4 2019 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, Feb 5, 2020
Slide 1: Investor Information Q4 2019
INVESTOR INFORMATION Q4 2019 Published February 5, 2020
Slide 2: A resilient business focused on shareholder returns
2 A resilient business focused on shareholder returns Cash generation Free funds flow4 growth progress Significant upside FFO1 sensitivity to WTI, based on TTM2 actuals Strong potential FFO5 increase largely independent of market conditions (C$ billion) FFO1 sensitivity $14 to WTI based on TTM2 oper
Slide 3: Integrated across the value chain
3 Integrated across the value chain Long life, low decline assets 100% oil production High margin barrels Strong downstream markets Iconic Canadian retail brand 28+ years ~940 mbpd ~600 mbpd ~460 mbpd ~1750 2P Reserve Oil production Heavy upgrading Refining nameplate Petro-Canada Life Index1 namepla
Slide 4: Generating discretionary free funds flow
4 Generating discretionary free funds flow1 FFO2 consistently exceeds sustaining capital3, associated capitalized interest and dividends (C$ billions) $12 Growing free funds flow per share ($/share)4 $3.20/sh $2.70/sh $10.8 $10 $10.2 $2.40/sh $9.1 $8 $1.10/sh $6 $6.0 $2.3 $2.6 $2.1 $4 $1.9 $2 $3.4 $
Slide 5: Returning value to shareholders
5 Returning value to shareholders >9% shares Q1 2020 per cumulative 11% dividend increase to $0.465/share $9 share shareholder 2017 - 20191 returns repurchased since May 20172 ~$14B returned $100 Buyback per share (Actual)3 to shareholders 2017 – 20191 $3.50 Buyback per share (Anticipated)4, 5 Oppor
Slide 6: Free funds flow growth – Medium-term investment proposition
6 Free funds flow1 growth – Medium-term investment proposition2 Free funds flow1 improvement potential for years 2020 - 2023 inclusive3 Excluding commodity price changes & largely independent of production growth structural, sustained $2.0B Identification free funds flow1 growth through Scoping marg
Slide 7: Disciplined capital allocation plan
7 Disciplined capital allocation plan1 US$10/bbl increase in Brent price would generate ~$2.55 billion of additional FFO2 Annual capital commitments Annual discretionary capital (C$B) (C$B) Sustained Balance sheet 2020 price outlook* leverage production (WTI USD$/bbl) metrics growth3 Sustaining FFO
Slide 8: Suncor's competitive advantage
8 Suncor’s competitive advantage Long life, low decline Unique business Financial strength and low cost integration through market cycles ~820 mbpd 2020 production guidance midpoint5 ~1,000 mbpd of conversion capacity6 Resilient FFO8 ~31yrs ~600 mbpd of heavy upgrading capacity7 ~$65 Oil Sands 2P Re
Slide 9: The foundation of our business
9 The foundation of our business Operational excellence Personal and Process Safety Journey to Zero – goal to eliminate all workplace incidents RELIABLE Reliability Continuously improve the reliability of our business Cost Management Continuous focus on structural cost reduction initiatives Environm
Slide 10: Strong balance sheet
10 Strong balance sheet 1.5x Net debt to FFO1 Net debt to FFO1 1.3x under the previous leasing standard2 Has remained within target range throughout all price cycles Target < 3x 30% Total debt to capitalization 97.95 28% under the previous leasing standard2 94.20 93.00 Target 20-35% WTI $6.7B Liquid
Slide 11: Strong return on capital employed
11 Strong return on capital employed1 20% ROCE1 comparison $100 Oil Sands Peers $80 15% $60 10% Suncor's spending on major capital projects $40 Fort Hills and Hebron completed 5% $20 0% $0 -5% -$20 2014 2015 2016 2017 2018 Q3 2019 The 50-year, long-life, low-decline TTM2 production profile of Fort H
Slide 12: New Cogeneration Facility Sanctioning
12 New Cogeneration Facility Sanctioning1 Heat required for mining operations Economically Robust % IRR independent of oil price & pipeline egress HIGH TEEN 2 Natural gas INPUTS Water $1.4B Capital investment over 4 years Increase revenue from power sales 0 Lower sustaining capital by replacing agin
Slide 13: Disciplined cost management
13 Disciplined cost management History of structural cost reductions Consistent reduction in Oil Sands operations cash operating costs (C$/bbl) (Fort Hills and Syncrude cash operating costs are not included) Heavy Reflects 2020 $40 Oil Sands1 maintenance mandatory guidance Medium-term $37.00 year in
Slide 14: Generating industry-leading FFO per barrel and shareholder returns
14 Generating industry-leading FFO1 per barrel and shareholder returns Delivering leading FFO1 per barrel2 and shareholder returns, demonstrating the value of our integrated business model and global competitiveness Quality funds flow Shareholder returns Reliable quality funds flow from Suncor’s uni
Slide 15: The value of Suncor's integrated business
15 The value of Suncor’s integrated business Benefiting from our crude and product strategy through all market cycles Exposure to high value product pricing provides significant cash flow upside potential BRENT PRICING ~110 mbpd E&P production attracts Brent based pricing ~600 SYNTHETIC Bitumen conv
Slide 16: Regional synergy opportunities for existing assets
16 Regional synergy opportunities1 for existing assets Crude logistics Upgrader feedstock optionality from multiple oil sands assets Crude feedstock optionality for Edmonton refinery Supply chain Sparing, warehousing and supply chain management Consolidation of regional contracts (lodging, busing, f
Slide 17: Suncor's proven oil sands reliability journey
17 Suncor’s proven oil sands reliability journey Suncor Base Plant upgrader reliability Multi-year journey to reach >90% reliability 91% 90% 1 91% 90% 2 90% 83% 81% 79% Suncor began focusing on upgrader reliability initiatives in 2011 Firebag to Base Mine Culture – Operational excellence mindset int
Slide 18: Market access for Suncor's oil sands production
18 Market access for Suncor’s oil sands production Suncor has made strategic investments in refineries and current/proposed logistics infrastructure to mitigate Alberta egress limitations and market disconnects Fort McMurray ~750 Alberta egress bottleneck does not impact the ability to move Suncor b
Slide 19: Leading deployment of mining technologies
19 Leading deployment of mining technologies Autonomous Haul Systems (AHS) Fort Hills - Higher quality, fungible product Fully deployed at North Steepbank Mine Paraffinic Froth Treatment in secondary extraction Fort Hills & Millennium estimated 2020 & 2023, respectively Bitumen froth mixed with so
Slide 20: Sustainability leadership
20 Sustainability leadership Improving GHG performance Investing in the energy transition Building Indigenous partnerships Goal to reduce corporate GHG emissions Investing in new technologies across our value Increasing the participation of Indigenous intensity by 30% by 20301 chain to reduce costs
Slide 21: Tailings reclamation – Reducing costs and footprint with PASS
21 Tailings reclamation – Reducing costs and footprint with PASS PASS technology aims to treat fluid tailings to accelerate reclamation & lower environmental footprint at a lower cost In 2019, PASS further increased tailings treatment capacity to ~230% of total annual fluid tailings production, help
Slide 22: IMO 2020 – Positive FFO impact expected for Suncor
22 IMO1 2020 – Positive FFO2 impact expected for Suncor Expect IMO1 regulatory change will enhance demand for middle distillates used in new marine fuel Projected impacts Suncor advantages Decreasing global demand for bunker fuel3 Minimal exposure to bunker fuel3 Sales from Suncor refineries (~1%) W
Slide 23: Notes
23 Notes SuNCoR)
Slide 24: Appendix
24 Appendix SuNCoR)
Slide 25: 2020 Capital and production guidance
25 2020 Capital and production guidance1 2020 Capital2 Economic Investment3 Production4 $ millions percent boepd Oil Sands 3,550 – 3,800 35% 420,000 – 455,000 Oil Sands operations E&P 1,000 – 1,150 95% 85,000 – 95,000 Fort Hills Downstream 700 – 800 30% 170,000 – 185,000 Syncrude Corporate 150 – 250
Slide 26: High quality mining, in situ and upgrading portfolio
26 High quality mining, in situ and upgrading portfolio1 *All values net to Suncor In Situ Mining Firebag Base Plant 203,000 bpd capacity 350,000 bpd capacity Suncor WI 100% Suncor WI 100% 2,553 mmbbls 2P reserves1 1,418 mmbbls 2P reserves1 MacKay River Syncrude 38,000 bpd capacity Syncrude operated
Slide 27: Long life, low decline reserves base
27 Long life, low decline reserves base Typical attributes1 of North American oil plays Initial Decline Sustaining Operating Reservoir Recovery Illustrative annual FFO2 profiles3 capital rate costs cost risk factor Mining High Very low Low Medium Very low Very high ~85% of Suncor’s 2020 production g
Slide 28: Canada's largest Refining & Marketing business
28 Canada’s largest Refining & Marketing business Edmonton refinery Sarnia refinery 142,000 bpd capacity1 85,000 bpd capacity1 100% oil sands feedstock2 ~80% oil sands feedstock2 Commerce City refinery Montreal refinery 98,000 bpd capacity1 137,000 bpd capacity1 ~20% oil sands feedstock2 ~30% oil sa
Slide 29: Refining & Marketing – Demonstrating cash flow resilience
29 Refining & Marketing – Demonstrating cash flow resilience R&M funds from operations1 WTI – WCS ($US/bbl) Refinery utilization vs. US average Suncor Capturing the value at all differentials FFO ($C billions) Percent of refining capacity US Average2 25.50 26.30 Full turnaround 5 21.05 19.40 100% at
Slide 30: Offshore with >390 million barrels of 2P reserves
30 Offshore with >390 million barrels of 2P reserves1 East Coast Canada North Sea Hibernia ExxonMobil operated Buzzard Suncor working interest 20% CNOOC Petroleum Europe Limited operated 63 mmboe 2P reserves1 (Suncor WI) Suncor working interest 29.89% 57 mmboe 2P reserves1 (Suncor WI) Hebron ExxonMo
Slide 31: E&P – Investing in high value, low risk projects
31 E&P – Investing in high value, low risk projects Recent performance Sanctioned projects1 mboe/d Fenja (Norway) 120 • 17.5% working interest 100 • 6 mbbls/d anticipated net peak production Hebron • First oil expected 2021 80 White Rose 60 Hibernia Buzzard Phase 2 (UK) Terra Nova • 29.89% working i
Slide 32: Track record of counter-cyclical acquisitions and divestments
32 Track record of counter-cyclical acquisitions and divestments 10% Fort Hills WI $100 WTI US$/bbl Non-core UK offshore 1 Total E&P Canada $80 37% Syncrude WI 2 7 Canadian Oil Sands $60 6 Petro-Canada 5 1 4 2 3 3 Rosebank $40 30% WI $20 5% Syncrude WI 4 Murphy Oil $40 NYH 2-1-1 US$/bbl 3.31% Fort H
Slide 33: Notes
33 Notes SuNCoR)
Slide 34: Notes
34 Notes SuNCoR)
Slide 35: Advisories
35 Advisories Forward-Looking Statements – This presentation contains certain expected levels; the sufficiency of budgeted capital expenditures in Syncrude cash operating costs, Fort Hills cash operating costs, In Situ “forward-looking statements” within the meaning of the United States carrying out
Slide 36: Slide Notes
36 Slide Notes Slide 2------------------------------------------------------------- represents anticipated asset sustainment and maintenance capital Forward-Looking Statements in the Advisories. (1) Funds from operations (FFO) is a non-GAAP financial measure. expenditures plus well pad spend (inclus
Slide 37: Slide Notes (continued)
37 Slide Notes (continued) Slide 6 --------------------------------------------------------------- economic capital spend, no acquisitions and no divestments during taxes divided by the average of total assets less the average of (1) Free funds flow, previously referred to as free cash flow, is that
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 13-------------------------------------------------------------- Shell plc., Total S.A. Source of information: Factset. Advisories. (1) Refers to Oil Sands operations cash operating costs per barrel, (5) Dividend yield is calculated as annual dividend per share divid
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 25------------------------------------------------------------ (4) Includes working interests in four operating wind farms with gross HollyFrontier Corporation, which closed on February 1, 2017. (1) Full guidance is available at suncor.com/guidance. See Forward- inst
Slide 40: Investor Relations contacts
Investor Relations contacts Trevor Bell Kate Charlton Muhammad Usman Kinga Uto Ben Harris Vice President IR Director IR Senior Analyst IR Senior ESG Analyst IR Analyst IR [email protected] [email protected] [email protected] [email protected] [email protected] Visit us at the Investor Centre on